Tax time is upon us, are you looking for ways to spend it wisely?
We have compiled a list of what we think are 5 of the best ways you can make this tax return work for you. You will need to ascertain your current needs and then look at making the selection to make sure it is right for you. The best thing to do is to keep in mind this is not a bonus from the government, but rather money that has been yours all along – spend it in areas you would with a normal pay cheque.
1. Paying off high interest debt
Use the money to reduce or completely eliminate any debt you have including credit cards, student loans, payday loans or any other high interest loans you may have acquired. You may remember our posts about paying off debt in the two strategies that are our favourites – the snowball strategy & the debt stacking method.
2. Create or contribute to an emergency fund
One financial setback is enough to send anyone into a tailspin financially. Unexpected medical bills, parents getting ill and needing to place them in care, a sick child and unemployment are just a few of what we have found some of our clients have gone through over the years. Having an emergency fund is recommended by many professionals and financial gurus. Generally, they tend to say you should have about 8 months equivalent to your living expenses in savings. These funds could be deposited into an easily accessible savings account (one that is interest bearing), and tucked away. It might take you months or years to get to this amount so use the funds to make a significant deposit to kickstart or inject your emergency fund with some further cash.
3. Refinance your mortgage or make some home renovations
When you refinance, you still pay costs and fees associated with the banks and the brokers. Using the refund for the closing costs and fees, it could result in saving you thousands in the long run on the interest rate of your current mortgage. If you are happy with your current mortgage – then have a look at the cosmetics on the house, are you happy with your roof or do you want a new patio? If you are happy with these things, then perhaps you could look at reducing electricity with a new energy efficient appliance.
4. Donate to a charitable cause
On a tight budget sometimes contributing to charity can take a bit of a back burner in most people’s lives. This is a great opportunity for you you to give back. Charity donations are an excellent use of capital, and whilst this donations results are not as measurable or as immediate as investing in a financial market, giving to charity will benefit your community in a major way. Donations to registered charities would be tax deductible and you can speak to your accountant about this.
5. Get a new business up and running
Have you been looking for a way to take your business to the next level, or looking to raise some capital for a new project? This is an opportunity to take the refund and convert it to some income – and you could claim some tax deductions along the way too.
So there you have it folks, if you have not decided what you are doing with your refund this year, we hope you take the time to let it work for you and improve your financial situation. If you have received a tidy amount — spending a little bit on yourself is also ok too, just be wary of blowing it all on one unnecessary indulgence.
Written by Kristy Thomas